All posts tagged krone

Despite a rise of 14% since the start of the year, the price of a barrel of Brent crude oil remains well below its all-time

peak in dollar terms: the $147.50 level hit in July 2008.

But against the European majors it has just set new records, hitting €92.75 and £78.44. Both the euro and sterling were much stronger against the greenback early in 2008 than they are at present.

Now oil is naturally a much weaker determinant of the fortunes of the euro and sterling than it is for the commodity producers’ currencies. Crude’s benchmark status for the entire raw-material complex, and its link to global growth prospects, means that one-year correlations between it and the Canadian and Australian dollars, or the Norwegian krone, are much higher. USD/CAD and USD/NOK have an inverse correlation of 0.7 with the price of Brent, while AUD/USD’s positive correlation is 0.65.

EUR/USD’s, meanwhile, is a more modest 0.4 while GBP/USD’s is 0.3, so oil’s rise is if anything likely to provide both currencies with only modest support.

However, in these days of fragile economic recoveries and euro-zone crisis, the situation is more nuanced.

Norway’s krone Tuesday hit its highest level against the euro since February 2003 as investors sought alternatives to the safe-haven Swiss franc after the Swiss National Bank moved to put a floor under the euro at 1.20 francs.

The Norwegian krone was trading at 7.5427 kroner to the euro by afternoon in Europe, strengthening from 7.6773 in early morning trading.

“It is a flight to whatever is left of quality or a safe haven,” said Kari Due-Andresen at Handelsbanken in Norway. “There is a lack of safe havens and people are turning their eyes to Norway with its rock solid finances and good growth.”

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